Southfield, MI - Thorn Apple Valley, Inc. disclosed additional information related to its June 24, 1998, announcement to exit the fresh pork business and focus on its processed meats operations as an independent entity. The company also detailed the financial and strategic benefits of its decision and confirmed favorable prospects for the company as a producer and marketer of processed meats.
Thorn Apple Valley's slaughter facility will close its doors in a few weeks. The Detroit-based operation, which generated approximately 37% of the company's $955.8 million in fiscal 1997 revenues, had caused roughly a $45-million pretax drain on the company's consolidated earnings over the past three years, resulting in company-wide losses of $21.7 million and $3.2 million in fiscal 1996 and 1997, respectively. The company expects the move to dramatically improve cash flow. Depreciation will be roughly $13 million, and interest expense will decline to approximately $12 million. Cash generated by the sale of assets will be used to pay down the company's long-term debt.
Thorn Apple Valley also narrowed the expected range of the resulting fourth-quarter, pretax charge to between $42 and $47 million, most of which will be non-cash. Thorn Apple Valley's fourth quarter fiscal 1998 ended on May 29, 1998; results are expected to be announced in mid-August.
Commented President and Chief Executive Officer Joel Dorfman, “The decision to exit the fresh pork business and focus on our processed meats operations is a very positive move that is in the best interest of this company and our shareholders. We are disappointed with the market's apparent initial response to this strategy but feel that once the benefits are better understood, more investors will appreciate and embrace our decision.
“Currently, we are working with a major industry player to finalize a favorable supply agreement to replace the raw materials provided by our slaughter operations and a $10 million convertible debt investment,” he said. “We expect the proceeds from this offering to cover the costs of closing our slaughter operations and add to our cash position. We feel this offering represents a significant vote of confidence in our new strategy by an entity that is an expert in our industry.”
Dorfman continued, “Our decision to focus solely on our processed meats operations follows a thorough operational analysis and comprehensive exploration of strategic alternatives for maximizing shareholder value, which we conducted with investment banker Nesbitt Burns Securities Inc. Our processed meats segment is a viable and growing business with tremendous upside potential. Unlike fresh pork, the diverse ingredients in processed product minimize the impact of hog and other supply challenges. Its value- added nature, combined with Thorn Apple Valley's emphasis on brand marketing and product innovation, gives us greater volume and margin potential.
“To harness that potential, we have augmented our sales staff with new personnel as well as intensive sales training, and we are beginning to see the fruits of that investment. Current bookings for the 1998 holiday season for our various premium hams are running ahead of last year, and we expect to be sold out. Moreover, key, higher-margin items, such as our skinless smoked sausage, are showing year-over-year volume increases, reversing a two-year trend of declining sales. This sales growth has resulted in most of our plants reaching capacity with their current manpower, necessitating additional shifts and hiring. Thorn Apple Valley's modern, low-cost infrastructure should allow us to bring more of that revenue growth to the bottom line.”
Looking forward, Dorfman concluded, “Given current trends and industry conditions, we should have the opportunity to return to profitability within the current fiscal year. To ensure continued operational excellence, we plan to invest approximately $4 million in plants and equipment over fiscal 1999. We are confident that our prospects are favorable and that our new strategy will deliver both near- and long-term results and increase shareholder value.”
Following a three-year, $180-million modernization program, Thorn Apple Valley has emerged as a leading meat processor with a low-cost infrastructure, an extensive product portfolio that includes five #1- selling national branded products and an expanding international presence. The company is also one of the largest slaughterers of hogs and sellers of related fresh pork products in the United States. Heat Wave Threatens Cattle in Florida June 30, 1998
Miami, FL - The heat wave in Florida is shriveling grass and scrubland on ranches, leaving little for cattle to eat, state and industry officials said.
Unless rains come soon, the ranches could be in crisis as they will also be left with depleted stocks of hay for the winter, they said.
Some cattle have died, state veterinarian Lee Coffman said.
“It's a difficult situation. There are animals dying...how many is difficult to assess.”
Officials were in the process of compiling figures, he said. As animals sought to lay down in cover to get out of the sun, they were often difficult to spot, he added.
Jim Hanley, executive president of the Florida Cattleman's Association, said he had not heard of any cattle dying. But he added: “It's kind of getting extreme now. The pasture is not at the rate of growth it needs to be.”
Coffman said one rancher told him it was the worst situation he had seen in 50 years.
The worst hit areas are north of Tampa and south of Ocala in central Florida and through to the Panhandle in the north, he said.
“Jackson County (in the Panhandle) is terrible, and that has the densest cattle population in the state,” Coffman said.
Small producers were hardest hit, he added.
The pasturelands were first hit by excessive rains in winter which doused growth. Then a heatwave across the state since May shriveled vegetation. Brush fires raging across much of the north and central Florida have also seared grazing lands.
Coffman said the state was trying to buy 1,500 round bales of hay weighing 800 pounds each to boost supplies. Buyers were looking in Virginia, Tennessee and Arkansas.
Hanley said that although the fires had killed no cattle, they were causing other problems. As well as burning up land, they destroyed fences, permitting cattle to run free.
Also many ranchers were involved in other agricultural activity and were suffering losses as flames ate up timber.
Hanley said ranchers should also be harvesting hay now for the winter but the yield was low.
He estimated the state's beef cattle population at about two million head; there were also about 160,000 milking-age dairy cows.
Meat Industry Insights News Service
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Phone: 631-757-4010
Fax: 631-757-4060
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